Even if the PR economy is only going through a transition, it is an extremely painful one for many. Employment trends have polarized the workforce and hollowed out the middle class. Poor job growth is still the result of a sluggish economy. Will the pressure on employment and the resulting inequality only get worse? As this issue of Compass reveals, economic fundamentals still continue to underperform after 7 years of economic recession. Many worry that even with robust demand, the construction sector will continue to struggle with underutilized capacity. Manufacturing is barely holding. We continue to expect a weak economy, burdened by the collection of new taxes. Consumer confidence is weak as rising gasoline, electricity, and water prices pull future spending to lower levels. While the banking index is not back to pre-recession levels, the recent gain is positive. Growth is likely to still lag behind most previous recoveries.

Puerto Rico’s own Great Recession has already left an indelible mark on the local economy with several important issues still unresolved. The channels through which microeconomic activities typically unfold are in disequilibrium. Moreover, the Puerto Rican economy has not responded to economic fundamentals for some years, not because policy makers are consistently getting it wrong but rather because the fundamentals themselves have not stopped changing. As a result, old practices are dying out while new ones are emerging in response to these very fluctuations. These changes will create challenges in the form of market gaps and unmet demand that will transform the way businesses are conducted on the Island. This second installment on local SMEs examines how the new emerging economic fundamentals are creating opportunities for small-scale businesses. Hence, not everything is lost for the Island.